Another explanation of supply and demand in the oil market

Anyone who has a case of tired head after reading Part 1 of a discussion about oil prices and profits: the oil market should read this post by Jim Caserta on the same topic. Jim's explanation is shorter (hard to believe, I know) and more concise than mine. I particularly like the following paragraph because it helps explain the "tight" market:

Oil and gas don't follow Econ101 supply and demand curves. There is a ceiling on supply both for raw oil and refining capacity. Demand is fairly inelastic - habits are hard to change, and it takes time to change the average fuel economy of America's and the world's automobiles. On supply, the price vs. supply curve is nearly vertical at the capacity limit, and any small shift in supply produces a large shift in price. Likewise, demand is a very shallow curve with a floor: it takes a big shift in price to make a little shift in demand.

Jim is correct that the oil market does not follow the most basic of supply and demand curves. Believe it or not, this does not contradict what I said in my previous post. The oil market is still a supply and demand market in a big way; however, there are myriad factors which affect those two basic components. Jim's post helps explain some of those factors. He also has several other posts about oil and gasoline that are worth a read. So even if you do not have tired head, check out Jim Caserta's blog.